ETP assets hit record highs

The assets under management of commodity exchange traded products (ETPs) hit record highs in the first quarter of the year, according to ETF Securities, as strong global economic growth and rising political and financial risks pushed gold, silver and oil prices to post-recession highs.

Total assets invested in ETPs rose by more than $10bn in the period, hitting a new all-time high of $174bn, up 58 per cent from a year ago. Total net inflows in the first three months of the year were more than three times higher than inflows this time last year.

Most of the gains were due to non-precious metal ETPs, with agriculture and industrial metal ETPs making up the largest part of the gains.

In a turnaround from last year, gold ETPs experienced net outflows in the first quarter, most of which ($2.6bn) poured out in January as investors took profits and re-allocated into riskier assets. This compared with inflows of $15.3bn in the same period last year.

Middle East and North African turmoil, however, added to sovereign risk in Europe, and worries on global inflation resulted in gold ETP flow reverse from February on.

By the end of March, the gold price was back at an all-time high, and gold ETP flows were trending up strongly. This week gold hit another nominal high, with industry experts saying it has further to go.

There was also a rising demand for agriculture ETPs in the first quarter, with inflows rising by $1bn in February alone.

ETF Securities' quarterly report on commodities stated: "The increase in demand for agriculture ETPs likely stems from investors’ desire to hedge risks associated with increased global food price inflation."